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5 Gold Stocks to Abate Coronavirus Driven Fears

Zacks Equity Research
·5 min read

The Federal Reserve and other central banks across the global are planning to take counter measures to calm investors’ concerns about coronavirus outbreak. With stocks taking a beating, investors are hunting for safe haven assets like gold. With central banks expected to cut rates to stimulate the global economy, investing in gold mining stocks seems prudent. After all, a low interest rate environment bodes well for gold prices.

Confirmed Covid-19 Cases 90,933 and Counting

Coronavirus has spread to various countries, with the global death toll rising to 3,119. So far, it has infected 90,933 people worldwide. It has also blocked global supply chain and forced countries to quarantine and shut down factories.

In the United States, six deaths due to Covid-19 have raised fears of a bigger outbreak. What makes things worse is that there is no cure yet. Drug makers hope to have antiviral treatments ready within a few months and vaccines by next year. Till then, health officials have no option but to issue advisories for prevention. Limiting overseas travel, especially to Japan, Iran and South Korea, can also help to reduce cases of transmission.

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In fact, Twitter, Hewlett Packard Enterprise and many more companies have asked employees to work from home and also canceled events or closed offices due to the risk of infections.

The coronavirus outbreak continues to weigh heavily on global economy, with major benchmarks declining more than 10% in the last week of February. However, governments and central banks are preparing to adopt emergency measures and economic packages to fight the slump.

Why Buy Yellow Metal?

With the global economy in turmoil caused by the coronavirus scare, investors are selling off their holdings and hunting for safe-havens like gold. The yellow metal had hit a new seven-year high on Feb 24,and seems to be the most attractive investment right now. In fact, Gold for April delivery rose $28.10, or 1.8%, to settle at $1,594.80 an ounce, on Mar 2. In fact, Gold Apr 20 has gained 4.6% so far this year. (Read More: 5 Stocks to Make the Most of Coronavirus Scare)

And why not? Coronavirus fears are very evident. China’s manufacturing purchasing managers index (PMI) came in at a record low of 35.7 in February compared with 50.0 in January. With quarantines in place and factory shutdown, recovery is nowhere in sight.

The lingering fear of coronavirus impact on the global economy has led central banks to think of monetary easing. On Feb 28, Federal Reserve Chairman Jerome Powell said in a mid-day statement that central banks are “closely monitoring developments” and analyzing their impact on the economic outlook.

Investors believe that the Federal Reserve will now act aggressively fearing an economic slowdown and slash rates by at least 50 basis points.  Now, with increase in chances of interest rate cut by Fed, gold has become a more attractive investment.

5 Glittering Stocks to Buy

Here are five yellow metal mining stocks that sport a Zacks Rank #1 (Strong Buy) or #2 (Buy) that may yield impressive returns on investment.

Kirkland Lake Gold Ltd. KL is our first choice among gold mining companies. This Zacks Rank #1 company has mines located in Canada and Australia.The company’s expected earnings growth rate for the current year is 33.2% compared with the Zacks Mining - Gold industry’s projected earnings growth of 19.8%.

The Zacks Consensus Estimate for Kirkland Lake Gold’s current-year earnings has risen 16.6% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinox Gold Corp. EQX explores for gold, copper, and silver deposits, in its mines located in Brazil and the United States. The company’s expected earnings growth rate for the next year is more than 100% compared with the Zacks Mining - Gold industry’s projected earnings growth of 8.3%.

The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has risen 22.2% over the past 60 days.

Our next choice is a surface gold tailings retreatment business, DRDGOLD Limited DRD. The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Mining - Gold industry’s projected earnings growth of 19.8%.

The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has risen more than 100% over the past 60 days.

Franco-Nevada Corporation FNV operates as a gold-focused royalty and stream company in the United States, Canada, Latin America, Australia and Africa.This Zacks Rank #2 company’s expected earnings growth rate for the current year is 47.9% compared with the Zacks Mining - Gold industry’s projected earnings growth of 19.8%.

The Zacks Consensus Estimate for the company’s current-year earnings has risen 1.8% over the past 60 days.

Lastly, we have, Kinross Gold Corporation KGC, which engages in the acquisition, exploration, and development of gold properties in the United States, Russia, Brazil, Chile, Ghana, and Mauritania. This Zacks Rank #2 company’s expected earnings growth rate for the current year is 29.4% compared with the Zacks Mining - Gold industry’s projected earnings growth of 19.8%.

The Zacks Consensus Estimate for Kinross Gold’s current-year earnings has risen 4.8% over the past 60 days.

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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
 
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
DRDGOLD Limited (DRD) : Free Stock Analysis Report
 
Kirkland Lake Gold Ltd. (KL) : Free Stock Analysis Report
 
Equinox Gold Corp. (EQX) : Free Stock Analysis Report
 
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Zacks Investment Research